Short-run average cost exceeds long-run average cost only when there are economies of scale
Indicate whether the statement is true or false
False. Short-run average costs exceed long-run average costs because the firm is locked into a certain input mix in the short run that may not be cost minimizing when all inputs are variable. This condition holds regardless of the presence of economies of scale.
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Aggregate demand and supply curves have been widely used to analyze the performance of the macroeconomy. Figure 5-3 shows four diagrams that represent different changes in the macroeconomy. Choose the diagram that best represents the situations described in the following questions.Figure 5-3
Which graph in Figure 5-3 best represents the aggregate demand-induced Great Depression of the 1930s?
A. 1 B. 2 C. 3 D. 4
The fact that a society's production possibilities curve is bowed out from the origin of a graph demonstrates the law of:
A) increasing opportunity cost. B) decreasing opportunity cost. C) constant opportunity cost. D) convex opportunity cost.
income effect
What will be an ideal response?
If Argentina has an absolute advantage in the production of beef and Guatemala has an absolute advantage in the production of bananas, then
A. it is reasonable to expect that specialization will benefit both countries, but trade will not. B. neither country has anything to gain from specialization and trade. C. it is reasonable to expect that trade will benefit both countries, but specialization will not. D. it is reasonable to expect that specialization and trade will benefit both countries.